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Banks lobby Sessions for meeting on fair lending


The U.S. banking lobby has asked for a meeting with Attorney General Jeff Sessions to get the Trump administration to reverse “overreaching” Obama-era rules that expose lenders to fair-lending lawsuits.

The trade groups, which include the Mortgage Bankers Association and American Bankers Association, are concerned that Trump’s Justice Department will continue the Obama administration's aggressive approach to prosecuting complaints against lenders by using what’s known as disparate-impact theory.

sessionsBasically, this theory holds that a company can be found to have discriminated against protected classes of people even if there was no intent to do so. The use of disparate-impact theory flowered under the Obama administration. During the election, Republicans pledged to eliminate it as a tool in enforcing fair-housing laws.

In a letter dated June 30 to Sessions, the groups wrote that “the actions of the [Justice] Department to date appear to further the prior administration’s policy.” The letter specifically mentioned a case in the Northern District of Illinois, where the department “espoused a concerning position of the previous administration.”

The U.S. Department of Housing and Urban Development (HUD), which administers the Fair Housing Act, the Department of Justice (DOJ) and the Consumer Financial Protection Bureau have brought numerous cases based on disparate-impact theory.

In 2013, HUD issued the final Discriminatory Effects Rule, which held that HUD or a private citizen can bring a case under the Fair Housing Act if they can establish that a company’s business practices had a discriminatory effect on a class of people, even if no discriminatory intent existed.

In  2015, the U.S. Supreme Court ruled that disparate-impact theory could be used to establish a claim, but set limitations on how it could be applied. The banking trade groups claims that HUD’s rule conflicts with the limitations established in the U.S. Supreme Court’s recent ruling. The letter also notes that there are several pending cases involving disparate-impact claims, and DOJ will soon have to meet a deadline to make its position known to various courts.

“Our members are committed to fair lending and expend substantial resources to ensure that credit decisions are based on a consumer’s qualifications for credit and without regard to factors such as race or national origin,” the letter said. “The civil rights team of the previous administration, however, sought to use the rule-making and enforcement process to establish novel and overreaching requirements that contradict Supreme Court precedent.”

Other groups signing on to the letter included the American Financial Services Association, the Consumer Mortgage Coalition and Independent Community Bankers of America. 


 

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